Protecting public employee pensions

August 3, 2010 - Pensions, corporate accountability and public image issues were front and center at the AFT Public Employees program and policy council's recent meeting in Louisville, Ky.

[AFT (American Federation of Teachers) is one of MEA-MFT's two national affiliates, along with the National Education Association. Like MEA-MFT, AFT represents state and county government employees along with educators.]

Gerri Madrid-Davis, executive director of the National Public Pension Coalition, reported that attacks on public pensions are not only widespread but are taking any number of forms.

Several years ago, when the NPPC was created by several unions including the AFT, the most common pension attacks sought to replace defined benefit retirement systems with defined contribution ones.

Now, Madrid-Davis said, so-called pension reforms include any combination of raising retirement ages, increasing workers' contributions, lowering the multiplier (which is part of the formula for determining benefits), or instituting combination plans for new hires that include a reduced defined benefit and a defined contribution component.

The attacks aren't just leveled on current workers and those who haven't entered the workforce yet, however. Madrid-Davis told the council that there have been retiree-specific attacks seeking to limit or eliminate cost-of-living adjustments that aren't constitutionally or statutorily protected and to diminish retiree health benefits.

Madrid-Davis said multi-stakeholder coalitions (including public employee unions) that were formed to protect the defined benefit retirement systems have had different responses, tailored to their respective budget and retirement plan situations. In California, for example, the coalition fully supports eliminating retirement system abuses such as double dipping, which occurs when a public employee retires, collects his or her pension and then returns to public service.

"We know fiscal years 2011 and 2012 budgets will be worse than fiscal year 2010," said Madrid-Davis, who advised that coalitions representing the broad range of public employees covered by government pension systems—state and local government workers, teachers, police and firefighters—should work together. That will reduce the likelihood that decision-makers will attack one group's benefits over another. In many states, pension shortfalls are the direct result of government, as the employer, skipping its payments into the retirement systems.

Dan Pedrotty, director of the AFL-CIO Office of Investment, gave the group a primer on the labor federation's proxy voting guidelines, which have been developed to serve as a guide for pension fund trustees when voting on shareholder proposals. Through the office's "key vote survey," voting practices of investment managers are measured to discern whether they support management accountability and good corporate governance on behalf of worker shareholders.

CEO pay is the canary in the mine, Pedrotty said, noting that 40 years ago, U.S. CEOs earned more than workers by a 40-1 ratio. Today, the ratio is 319-to-1. Arguments that this high level of pay is necessary for competition are disingenuous; Pedrotty noted that the CEO-worker pay ratio in the United States' competitor countries is 40- or 50-to-1.

There was consensus among the AFT Public Employee division leaders that campaigns featuring members talking about their work and how it benefits people and communities remain a priority. The group also discussed the division's September Budget Crisis Task Force meeting. Meeting participants will, among other things, develop plans to turn the recommendations of the revenue systems resource guide into policy proposals.

"There is reason to believe that the federal government will not be able to provide any more aid to states," Ed Muir, deputy director of the AFT's research and information services department, told the council. "We are going to have to find the revenue in the states."

The PPC meeting was held July 26, in conjunction with the National Conference of State Legislatures' annual Legislative Summit. A delegation of AFT leaders and staff, including the AFT Public Employees PPC, attends the NCSL meeting each year to educate state lawmakers about the union's perspective on issues ranging from tax and budget policy to pensions.

For the first time in the summit's history, an entire workshop track was devoted to pensions. Pension sessions addressed current issues, state responses and financing retiree health. Michael Mazerov of the Center on Budget and Policy Priorities and Grover Norquist of Americans for Tax Reform faced off during a session on whether online retailers should be required to collect sales taxes like brick-and-mortar retailers are required to do.

General sessions at the summit featured a number of prominent speakers, including House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Mitch McConnell (R-Ky.), who talked about national issues and the relationship between states and the federal government, and former Florida Gov. Jeb Bush, who talked about education reform.